plan their affairs such as to minimize tax exposures. But how far should one go to pay the least amount of tax possible? Is it an ethical obligation of wealth owners to pay headline rates of tax to help address wealth and income inequality and to not take steps to reduce tax exposures? Where is the line between legal tax planning and illegal tax evasion…and what of tax avoidance, something that used to be considered legal and appropriate, but which is increasingly condemned by tax authorities and others?”
On Political Risk
“[T]here are many risks that a wealth owner is subject to that can fall under the heading of ‘political’ risk, including changes in the tax landscape, perhaps in part as a result of a new focus on income and wealth inequality… Addressing political risk will be an increasing need of wealth owning families worldwide. The current focus on income and wealth inequality, increasing populism in the political sphere and the difficult financial position of many countries is increasing risk, and not only in parts of the world one normally thinks of as unstable.”
On the Wealth Management Industry
“Wealth management is a knowledge business, but sadly run by many who are more focused on their own interests than on the need to invest in and manage knowledge for the benefit of their clients. A wealth owner has little choice but to get a handle on what is relevant to their own situation, and be in a position to ask the right questions that will lead them to the right advisors. And for the wealth manager who gets it right, the opportunity to excel and attract clients is significant.”
“Today, around the world, there are increasing regulations that require asset managers to provide transparency on charges to their clients, but there continue to be many circumstances of hidden charges that asset managers, such as private banks, impose on their clients. Is the client aware that the bank may have made arrangements to receive ‘retrocessions’ or kick-backs from investment funds in which they may invest the client money they have under discretionary management? Relatively recent court decisions in Switzerland require banks to refund retrocessions they historically received in a number of circumstances, but unsurprisingly the industry is pretty quiet about the rights their clients may have to obtain refunds of amounts their advisors secretly received.”
On Independent Asset Managers and Family Offices
“Interesting to observe is that the independent asset manager and single and multi-family offices usually come into the picture when the wealth owning family gets fed up with the poor service they get from their traditional private bank. And while the private bank ends up being nothing more than a custodian, the independent asset manager or family office begin to focus on negotiating even these fees on behalf of the wealth owner, putting more pressure on the private banks.”
On Compliance as a Client Need
“Compliance is a client need. Tax and related reporting requirements are only part of the picture, and too few banks realize that families need help to understand the choices they have on how to structure their affairs and ensure that they know who has what information on their family and assets and where that information is going to go. Delegating these things to the compliance department is not enough – helping clients deal with increasing compliance is part of the service an effective bank or trust company needs to provide.”
The Destructive Power of Family Wealth
A GUIDE TO SUCCESSION PLANNING, ASSET PROTECTION,
TAXATION AND WEALTH MANAGEMENT
Philip Marcovici
This edition first published 2016
© 2016 Philip Marcovici
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Preface
Now retired from practicing law, I spent my career as an international tax and private-client lawyer, working with families, businesses, and the wealth-management industry, first in New York and Vancouver, then in Hong Kong and Zurich. I have also worked with governments seeking to address the global problem of undeclared funds, and have taught widely in Asia and Europe, learning while sharing my views on the potentially destructive nature of wealth and the failings of the wealth-management industry, and of advisors, to truly help the families they are meant to serve.
I began working with wealth-owning families on their succession and other needs early in the 1980s, in Hong Kong. Having studied law in both Canada and the USA, I had started out as a corporate tax lawyer in New York, and then moved to Hong Kong where I spent 12 years practicing law. The 1980s and early 1990s were interesting times in Hong Kong. Pretty much the most capitalist place in the world was soon to revert to pretty much the most communist place in the world. China, which was a very different country in the 1980s and early 1990s than it is today, was negotiating the return of Hong Kong by the UK. The UK had been governing Hong Kong under treaties that, in part, were coming to an end after a term of 99 years. The handover of Hong Kong to China was ultimately agreed between
